| Abstract: |
It is now stylized that, while the impact of ownership on firm productivity is
unclear, product market competition can be expected to have a positive impact
on productivity, thereby making entry (or contestability of markets)
desirable. Traditional research in the context of entry has explored the
strategic reactions of incumbent firms when threatened by the possibility of
entry. However, following De Soto (1989), there has been increasing emphasis
on regulatory and institutional factors governing entry rates, especially in
the context of developing countries. Using 3-digit industry level data from
India, for the 1984-97 period, we examine the phenomenon of entry in the
Indian context. Our empirical results suggest that during the 1980s industry
level factors largely explained variations in entry rates, but that, following
the economic federalism brought about by the post-1991 reforms, variations
entry rates during the 1990s were explained largely by state level
institutional and legacy factors. We also find evidence to suggest that, in
India, entry rates were positively associated with growth in total factor
productivity. |